0001104659-03-009779.txt : 20030514 0001104659-03-009779.hdr.sgml : 20030514 20030514151228 ACCESSION NUMBER: 0001104659-03-009779 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030330 FILED AS OF DATE: 20030514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICAL STAFFING NETWORK HOLDINGS INC CENTRAL INDEX KEY: 0001163958 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 650865171 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31299 FILM NUMBER: 03698689 MAIL ADDRESS: STREET 1: 901 YAMATO ROAD STREET 2: SUITE 110 CITY: BOCA RATON STATE: FL ZIP: 33431 10-Q 1 j0867_10q.htm 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 250549

FORM 10-Q

ý	QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2003.

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-31299

MEDICAL STAFFING NETWORK HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		65-0865171
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

901 Yamato Road Suite 110 Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)

(561) 322-1300
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yesý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2) of the Exchange Act). Yesý No o

The number of shares of shares outstanding of each class of the issuer’s common stock, as of May 8, 2003: 30,190,800 shares Common Stock, par value $0.01 par value.

MEDICAL STAFFING NETWORK HOLDINGS, INC.

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	3

	Condensed Consolidated Balance Sheets as of December 29, 2002 and March 30, 2003 (Unaudited)	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2002 and March 30, 2003	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2002 and March 30, 2003	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	24

ITEM 4.	CONTROLS AND PROCEDURES	24

PART II. OTHER INFORMATION		25

ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K		25

SIGNATURES		26

CERTIFICATIONS		27

PART I - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

MEDICAL STAFFING NETWORK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 29, 2002			March 30, 2003
				(unaudited)
	(in thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	4,595		$	3,995
Accounts receivable, net of allowance for doubtful accounts of $2,757 and $3,148 at December 29, 2002 and March 30, 2003, respectively	93,780			97,462
Prepaid expenses	5,363			4,915
Other current assets	4,858			4,487
Total current assets	108,596			110,859

Furniture and equipment, net	12,643			13,781
Goodwill, net of accumulated amortization of $8,545 at December 29, 2002 and March 30, 2003	114,437			124,792
Intangible assets, net of accumulated amortization of $521 and $684 at December 29, 2002 and March 30, 2003, respectively	3,840			3,677
Other assets	8,567			8,661
Total assets	$	248,083		$	261,770

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,149		$	4,620
Accrued payroll and related liabilities	9,366			8,330
Other current liabilities	3,105			3,230
Current portion of long-term debt	8,775			10,395
Current portion of capital lease obligations	1,055			1,083
Total current liabilities	27,450			27,658

Long-term debt, net of current portion	69,225			76,605
Capital lease obligations, net of current portion	1,343			1,145
Other liabilities	4,397			5,184
Total liabilities	102,415			110,592

Commitments and contingencies

Stockholders’ equity:
Common stock, $0.01 par value, 75,000 authorized: 30,119 and 30,189 issued and outstanding at December 29, 2002 and March 30, 2003, respectively	301			302
Additional paid-in-capital	283,848			284,138
Accumulated other comprehensive loss, net of taxes	(105		)	(92		)
Accumulated deficit	(138,376		)	(133,170		)
Total stockholders’ equity	145,668			151,178
Total liabilities and stockholders’ equity	$	248,083		$	261,770

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEDICAL STAFFING NETWORK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended
	March 31, 2002		March 30, 2003
	(in thousands, except per share amounts)

Service revenues	$	103,228	$	144,419
Cost of services rendered	76,883		109,892
Gross profit	26,345		34,527

Operating expenses:
Selling, general and administrative	15,044		20,769
Corporate and administrative	1,666		2,299
Depreciation and amortization	852		1,624
Income from operations	8,783		9,835
Interest expense, net	4,040		1,159
Income before provision for income taxes	4,743		8,676
Provision for income taxes	1,946		3,470
Net income	2,797		5,206
Deduct required dividends on convertible preferred stock	2,458		—
Income available to common stockholders	$	339	$	5,206

Basic net income per share	$	12.78	$	0.17
Diluted net income per share	$	0.13	$	0.17

Weighted average number of common shares outstanding:
Basic	27		30,161
Diluted	21,970		31,162

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEDICAL STAFFING NETWORK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31, 2002			March 30, 2003
	(in thousands)

Operating activities
Net income	$	2,797		$	5,206
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	852			1,624
Amortization of debt issuance cost	193			258
Deferred income taxes	498			810
Provision for doubtful accounts	541			785
Loss on derivative instrument	10			13
Changes in operating assets and liabilities:
Accounts receivable	(7,481		)	(3,897		)
Prepaid expenses and other current assets	617			800
Other assets	(185		)	(327		)
Accounts payable	(3,049		)	(569		)
Accrued payroll and related liabilities	1,174			(1,073		)
Other current liabilities	(1,307		)	27
Other liabilities	2,430			(29		)
Net cash (used in) provided by operating activities	(2,910		)	3,628

Investing activities
Cash paid for acquisitions, net of cash acquired	—			(10,803		)
Purchases of furniture and equipment	(257		)	(1,981		)
Capitalized internal software costs	(437		)	(470		)
Net cash used in investing activities	(694		)	(13,254		)

Financing activities
Principal payments under capital lease obligations	(140		)	(265		)
Proceeds from borrowings on senior credit facility	4,000			13,500
Principal payments on debt	(11,017		)	(4,500		)
Proceeds from exercise of stock options	—			291
Net cash (used in) provided by financing activities	(7,157		)	9,026
Net decrease in cash and cash equivalents	(10,761		)	(600		)
Cash and cash equivalents at beginning of period	11,253			4,595
Cash and cash equivalents at end of period	$	492		$	3,995

Supplemental disclosure of noncash investing and financing activities:
Purchase of equipment through capital leases	$	1,294		$	95

Supplemental disclosures of cash flow information:
Interest paid	$	2,584		$	945
Income taxes paid	$	70		$	1,205

The accompanying notes are an integral part of these condensed consolidated financial statements.

MEDICAL STAFFING NETWORK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Medical Staffing Network Holdings, Inc. (the “Company”), a Delaware corporation, is a provider of healthcare staffing services in the United States. The Company’s per diem staffing assignments place professionals, predominately nurses, at hospitals and other healthcare facilities to solve temporary staffing needs. The Company also provides staffing of allied health professionals such as specialized radiology and diagnostic imaging specialists and clinical laboratory technicians. The Company’s client base includes profit and non-profit hospitals, teaching hospitals, and regional healthcare providers. The Company considers the different services described above to be one segment as each of these services relate solely to providing healthcare staffing to customers that are healthcare providers and the Company utilizes similar distribution methods, common systems, databases, procedures, processes and similar methods of identifying and serving these customers. The operating results of the services provided within this segment are reviewed in the aggregate by the Company’s chief operating decision maker when making resource allocation decisions and assessing performance of the individual components. The Company does not prepare financial information other than limited information on a branch by branch basis, and as such the chief operating decision maker generally does not review information at any level other than the healthcare staffing business in total. These healthcare staffing services represent 100% of the Company’s consolidated revenue for each of the three months ended March 31, 2002 and March 30, 2003.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 28, 2003.

The condensed consolidated balance sheet at December 29, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 29, 2002 (File No. 001-31299).

2. RECENT ACCOUNTING PRONOUNCEMENTS

Financial Statement Presentation of Early Extinguishment of Debt

In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). SFAS No. 145 rescinds SFAS No. 4 which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result of SFAS No. 145, the criteria in APB No. 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because SFAS No. 4 has been rescinded. The provisions of SFAS No. 145 shall be applied effective fiscal years beginning after May 15, 2002, with early application encouraged. The Company adopted the provisions as of December 29, 2002.

Exit or Disposal Activity Costs

In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No. 146), which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than when a commitment to an exit plan is made. It is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company adopted the provisions of SFAS 146 as of December 30, 2002. The adoption of this new accounting standard may delay the period or periods in which any future restructuring costs are recognized.

Stock-Based Compensation

In December 2002, FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123 (SFAS No. 148). This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Statement is effective for fiscal years ending after December 15, 2002. Pursuant to the provisions of SFAS No. 148, the Company has added the required disclosures below.

The Company grants stock options for a fixed number of common shares to employees and directors from time to time. The Company accounts for employee stock options using the intrinsic value method as prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognizes no compensation expense for stock option grants when the exercise price of the options equals, or is greater than, the market value of the underlying stock on the date of grant. Accordingly, the Company did not recognize any compensation cost during the three months ended March 31, 2002 and March 30, 2003 for stock-based employee compensation awards.

Application of the fair value method prescribed by SFAS No. 123 to the Company’s options would require the Company to record the following pro forma net income and net income per share amounts:

	Three Months Ended
	March 31, 2002			March 30, 2003
	(in thousands except per share amounts)
Net income as reported	$	2,797		$	5,206
Fair value method of stock based compensation, net of taxes	(259		)	(324		)
Pro forma net income	$	2,538		$	4,882

Reported net income per share:
Basic	$	12.78		$	0.17
Diluted	$	0.13		$	0.17

Pro forma net income per share:
Basic	$	3.02		$	0.16
Diluted	$	0.12		$	0.16

Pro forma information regarding net income or loss is required by SFAS No. 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value of options granted was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended
	March 31, 2002		March 30, 2003

Expected life in years	5 - 8		3 - 8
Risk-free interest rate	3.76 - 4.91	%	2.02 - 3.68	%
Volatility	60	%	65	%
Dividend yield	0	%	0	%

Variable Interest Entities

In January 2003, FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN No. 46). FIN No. 146 requires companies to make certain disclosures about variable interest entities (VIEs) with which it has involvement, if it is reasonably possible that it will consolidate or disclose information about the variable interest entity when FIN No. 46 becomes effective. The disclosure requirements are effective to all financial statements issued after January 31, 2003. The Company has no variable interest entities so no additional disclosures have been provided.

3. DISCONTINUED OPERATIONS

On February 18, 2003, the Company announced its intention to discontinue its physician staffing services in the first half of 2003. Pursuant to the provisions of the SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144) results of operations are to be classified as discontinued when the disposal of the “component of an entity” has occurred or it has met the “held for sale” criteria. The Company will be discontinuing its physician staffing services in the second quarter of 2003 and, as such, its results are included in the Company’s results of operations for the three-month periods ended March 31, 2002 and March 30, 2003. Physician staffing services revenue, gross profit (loss) and net income (loss) for the three months ended March 31, 2002, were approximately $1.4 million, $395,000 and $130,000, respectively. Physician staffing services revenue, gross profit (loss) and net income (loss) for the three months ended March 30, 2003, were approximately $406,000, $(44,000) and $(172,000), respectively.

4. ACQUISITION

In March 2003, the Company acquired certain assets of Saber-Salisbury Group (“SSG”), a temporary healthcare staffing company, for approximately $10.8 million in cash, of which approximately $2.2 million was held in escrow and the potential for additional consideration contingent upon SSG achieving certain financial results. Approximately $10.4 million of the purchase price was allocated to goodwill. The primary reason for the acquisition was to expand service offerings within the temporary healthcare industry. The acquisition was accounted for in accordance with SFAS No. 141 and, accordingly, the results of operations have been included in the condensed consolidated statement of operations beginning from March 1, 2003, the date when the Company assumed substantial control over SSG.

The allocation of purchase price related to the acquisition completed during the quarter ended March 30, 2003 is based on preliminary assessments of the assets acquired and liabilities assumed and could be subject to adjustment based on the ultimate resolution of such assessments.

5. LONG-TERM DEBT

On October 26, 2001, the Company entered into a $120.0 million senior credit facility. The senior credit facility consisted of (i) senior credit notes (Term A) in the amount of $40.0 million due in October 2006 bearing interest at a variable rate based on the Company’s leverage ratio (as defined), interest is payable at least quarterly and principal payments are payable quarterly commencing on March 31, 2003; (ii) senior credit notes (Term B) in the amount of $60.0 million which were due in October 2007 and bore interest at a variable rate based on the Company’s leverage ratio (as defined) with interest payable at least quarterly and principal payments payable quarterly commencing on March 31, 2003; and (iii) up to $20.0 million of revolving loans expiring on October 2006, bearing interest at a variable rate payable at least quarterly.

The senior credit facility is secured by substantially all of the assets of the Company and contains certain covenants that, among other things, limit the payment of dividends and restrict additional indebtedness and obligations, and require maintenance of certain financial ratios.

In connection with the Company’s initial public offering completed on April 23, 2002 (Note 7) approximately $93.4 million of the senior credit facility was repaid. On July 3, 2002, the Company amended the terms of its senior credit facility and entered into a $25.0 million note with terms and rights identical to its previous Term A notes. In accordance with the amendment, the remaining balance on the existing Term A and Term B notes were paid off. On October 3, 2002, the Company amended the terms of its senior credit facility and entered into a $65.0 million note with terms and rights identical to its previous Term A notes and reduced the borrowing capacity of its revolving loan from $20.0 million to $15.0 million.

On March 21, 2003, the Company amended the terms of its senior credit facility as follows: (i) Term A notes were increased to $77.0 million (Tranche A-1) with terms and rights identical to its previous Term A note, (ii) Tranche A-2 term loans (Tranche A-2) provide for up to $13.0 million of borrowings prior to December 31, 2003, with a minimum initial borrowing of $5.0 million and in integral multiples of $1.0 million thereafter. Tranche A-2 loans cannot be reborrowed once repaid, are due in October 2006 and bear interest at a variable rate based on the Company’s leverage ratio (as defined) with interest payable at least quarterly and principal payments payable quarterly commencing on March 31, 2004. The amendment did not affect the revolving loan’s $15.0 million borrowing capacity. As of March 30, 2003, the Company had the full $13.0 million available for borrowing on Tranche A-2. As of March 30, 2003, the Company had drawn $10.0 million and had $5.0 million available for borrowing on the revolving line of credit.

6. COMPREHENSIVE INCOME

SFAS No. 130, Comprehensive Income (SFAS No. 130), requires that an enterprise (a) classify items of other comprehensive income by their nature in the financial statements, and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The items of other comprehensive income that are typically required to be displayed are foreign currency items, minimum pension liability adjustments, unrealized gains and losses on certain investments in debt and equity securities and the effective portion of certain derivative instruments. There are no components of comprehensive income other than the Company’s net income and accumulated unrealized gain (loss) on the derivative instrument for the three-month periods ended March 31, 2002 and March 30, 2003.

The following table sets forth the computation of comprehensive income for the periods indicated:

	Three Months Ended
	March 31, 2002		March 30, 2003
	(in thousands)
Net income	$	2,797	$	5,206
Other comprehensive income (loss):
Unrealized gain (loss) on derivative, net of taxes	182		(13		)
Total comprehensive income	$	2,979	$	5,193

7. STOCKHOLDERS’ EQUITY

On April 12, 2002, the Company approved an amendment to its Certificate of Incorporation increasing the Company’s authorized shares of common stock to 75,000,000 shares and a stock split in the form of a stock dividend of 3.069375 for 1, each of which took effect immediately prior to the closing of the Company’s initial public offering. The financial statements have been restated to give retroactive recognition to the stock split in the prior periods, including all references in the condensed consolidated financial statements to number of shares and per share amounts.

On April 23, 2002, the Company completed its initial public offering of 7,812,500 shares of common stock at $19.00 per share. Additionally, the underwriters exercised the over-allotment option of 1,171,875 shares, bringing the total number of shares issued to 8,984,375. Total proceeds received by the Company, net of expenses related to the initial public offering were $156.3 million. The proceeds were used to repay $62.9 million of its outstanding balance under the senior unsecured notes, and approximately $93.4 million of the Company’s outstanding loans under the senior credit facility. Immediately prior to the completion of the initial public offering, the outstanding shares of Series I Preferred Stock were converted into 21,075,645 shares of common stock.

8. REDEEMABLE PREFERRED STOCK

During the first quarter of 2002, the Company had authorized 15,000,000 shares of preferred stock, par value $.01, of which 7,000,000 shares had been designated as Series I Convertible Preferred Stock. The Series I Convertible Preferred Stock had a stated value of $18.60 and 6,602,865 shares were issued in connection with the recapitalization. The holders of the Series I Convertible Preferred Stock were entitled to receive dividends at a rate of 8% per annum of the stated value compounded quarterly, which were cumulative and accrued whether or not declared by the Board of Directors and were payable when and as declared by the Board of Directors pursuant to certain restrictions (as defined) by the Company’s credit agreement. The Series I Convertible Preferred Stock could be converted at any time, at the option of the holder on a one-for-one basis by the holder upon written notice into fully paid and nonassessable shares of the Company’s common stock at an initial conversion price of $6.06, which was subject to adjustment pursuant to anti-dilution provisions. Upon completion of a Qualified Public Offering (as defined), each share of Series I Convertible Preferred Stock was to be automatically converted into common stock at its then effective conversion price. At any time after October 26, 2009, or upon consummation of a Change in Control (as defined), the holders of the Series I Convertible Preferred Stock could require the Company to redeem any or all of the outstanding shares of the Series I Convertible Preferred Stock at price in cash equal to the stated value per share plus any accrued but unpaid dividends. As discussed in Note 7, the outstanding shares of Series I Convertible Preferred Stock were converted into 21,075,645 shares of common stock in connection with the completion of the Company’s initial public offering on April 23, 2002.

9. EARNINGS PER SHARE

	Three Months Ended
	March 31, 2002			March 30, 2003
	(in thousands except per share amounts)
Numerator:
Net income before preferred stock dividend	$	2,797		$	5,206
Less preferred stock dividends	(2,458		)	—
Numerator for basic earnings per share-available to common stockholders	339			5,206

Effect of dilutive securities:
Add back preferred stock dividends	2,458			—

Numerator for diluted earnings per share-available to common stockholders	$	2,797		$	5,206

Denominator:
Denominator for basic earnings per share-weighted average shares	27			30,161
Effect of dilutive shares:
Employee stock options	1,176			1,001
Convertible preferred stock	20,767			—

Dilutive potential common shares	21,943			1,001

Denominator for diluted earnings per share-adjusted weighted average shares and assumed conversions	21,970			31,162

Basic net income per share	$	12.78		$	0.17

Diluted net income per share	$	0.13		$	0.17

For the three months ended March 30, 2003, 243,750 incremental options were excluded from the denominator for diluted earnings per share as the impact of conversion is anti-dilutive.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Management’s discussion and analysis of results of operations and financial condition is provided as a supplement to the accompanying condensed consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in financial condition and results of operations. The discussion and analysis is organized as follows:

• Overview. This section provides a general description of our business, as well as significant transactions that have occurred that we believe are important in understanding our financial condition and results of operations.

• Recent accounting pronouncements. This section provides an analysis of relevant recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) and the effect of those pronouncements.

• Results of operations. This section provides an analysis of our results of operations for the three months ended March 30, 2003 relative to the three months ended March 31, 2002 presented in the accompanying condensed consolidated statements of operations.

• Liquidity and capital resources. This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt and commitments that existed as of March 30, 2003.

• Critical accounting policies. This section discusses those accounting policies that are both considered important to our financial condition and results of operations, and require significant judgment and estimates on the part of management in their application.

• Caution concerning forward-looking statements. This section discusses how certain forward-looking statements made by us throughout this discussion and analysis are based on management’s present expectations about future events and are inherently susceptible to uncertainty and changes in circumstance.

Overview

Description of Business

We are a leading healthcare staffing company and the largest provider of per diem nurse staffing services in the United States as measured by revenues. More than two-thirds of our clients are acute care hospitals, clinics and surgical and ambulatory care centers. We serve both for-profit and not-for-profit organizations that range in scope from one facility to national chains with over 100 facilities. Our clients pay us directly. We do not receive a material portion of our revenues from Medicare or Medicaid reimbursements or similar state reimbursement programs.

Our per diem nurse staffing division currently operates in an integrated network of branches that are organized into several geographic regions. These branches serve as our direct contact with our healthcare professionals and clients. The cost structure of a typical branch is primarily fixed, consisting of limited personnel, office space rent, information systems infrastructure and office supplies. We have been able to develop a highly efficient branch management model that is easily scalable. Over the past few years, we have been active in growing our “branch-in-branch” concept. The branch-in-branch concept leverages off of the infrastructure currently in place at our branches, enabling us to offer different healthcare staffing disciplines through our existing branches with minimal additional resources required.

There is a great deal of upside potential in further expansion of our de novo activity but we have decided to put new office openings on hold until we see market conditions strengthen. In an effort to provide our services more cost effectively, we have enhanced our information technology platform to network together client and employee databases in contiguous markets. Additionally, we recently launched a direct pay program that enables our per diem healthcare professionals to have their earnings electronically transferred on to a payroll card on a daily basis, eliminating the requirement of visiting the local office to collect a paycheck. These enhancements enable us to expand the geographical coverage areas of our per diem offices. As a result, we will be able to service current markets with fewer offices. As such, we will take a charge in the second quarter for this restructuring. We have not yet finalized our restructuring plan, so the exact amount of the charge is uncertain. We expect that it will be material to net income for the second quarter, but we do not expect it to result in a loss for the quarter or to adversely impact the operating results of any subsequent quarter.

Service Revenues

All of our revenues are derived from providing healthcare staffing services. Approximately 71% of our first quarter 2003 revenues were derived from per diem nurse staffing, while allied healthcare professional staffing, which includes various non-nursing specialties such as radiology and diagnostic imaging specialists and clinical laboratory technicians, represented 17% of our first quarter 2003 revenues, travel nurse staffing (assignments lasting more than thirteen weeks) represented 12% of our first quarter 2003 revenues and physician staffing represented less than 1% of our first quarter 2003 revenues. Approximately 17% of our revenue growth in the first quarter 2003 was organic and was the result of increased volume and a favorable shift in the mix of services we rendered, with the balance the result of acquisitions and increased pricing.

De Novo Branches

Since 1998, we have opened 142 de novo branches (branches opened internally since our inception as opposed to branches acquired from third parties), including 11 in the first three months of 2002 (40 in the year ended December 29, 2002) and four in the first three months of 2003. We did not close any de novo branches in the first three months of 2002 and 2003 (one de novo branch was closed in the year ended December 29, 2002). The de novo branches opened in 2002 generated $4.8 million in revenues in the first three months of 2003.

Acquisitions

In the first three months of 2003, we purchased substantially all of the assets of one healthcare staffing company for an aggregate purchase price of $10.8 million. We made no acquisitions in the first three months of 2002. For the year ended December 29, 2002, we purchased substantially all of the assets of seven healthcare staffing companies for an aggregate purchase price of $56.4 million. All such acquisitions were accounted for as purchases and, accordingly, the results of these acquired businesses are included in our condensed consolidated financial statements from the date we assumed substantial control or the date of acquisition.

Initial Public Offering

On April 23, 2002, we completed our initial public offering of 7,812,500 shares of common stock at $19.00 per share. Additionally, the underwriters exercised the over-allotment option of 1,171,875 shares, bringing the total number of shares issued to 8,984,375. Total proceeds received by us, net of expenses related to the initial public offering were $156.3 million. The proceeds were used to repay $62.9 million of our outstanding balance under the senior unsecured notes, and approximately $93.4 million of our outstanding loans under the senior credit facility. Immediately prior to the completion of the initial public offering, the outstanding shares of Series I Preferred Stock were converted into 21,075,645 shares of common stock.

Discontinued Operations

On February 18, 2003, we announced our intention to discontinue our physician staffing services in the first half of 2003. Pursuant to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144) results of operations are to be classified as discontinued when the disposal of the “component of an entity” has occurred or it has met the “held for sale” criteria. We will be discontinuing our physician staffing services in the second quarter of 2003, and as such, the results are included in our results of operations for the three months ended March 31, 2002 and March 30, 2003. Physician staffing services revenue, gross profit (loss) and net income (loss) for the three months ended March 31, 2002, were approximately $1.4 million, $395,000 and $130,000, respectively. Physician staffing services revenue, gross profit (loss) and net income (loss) for the three months ended March 30, 2003, were approximately $406,000, $(44,000) and $(172,000), respectively.

Recent Accounting Pronouncements

Financial Statement Presentation of Early Extinguishment of Debt

In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS No. 145). SFAS No. 145 rescinds SFAS No. 4 which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result of SFAS No. 145, the criteria in APB No. 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because SFAS No. 4 has been rescinded. The provisions of SFAS No. 145 shall be applied effective fiscal years beginning after May 15, 2002, with early application encouraged. We adopted the provisions as of December 29, 2002.

Exit or Disposal Activity Costs

In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS No. 146), which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than when a commitment to an exit plan is made. It is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. We adopted the provisions of SFAS 146 as of December 30, 2002. The adoption of this new accounting standard may delay the period or periods in which any future restructuring costs are recognized.

Stock-Based Compensation

In December 2002, FASB issued SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123 (SFAS No. 148). This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Statement is effective for fiscal years ending after December 15, 2002 and its provisions were adopted as of December 29, 2002.

Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN No. 46). FIN No. 146 requires companies to make certain disclosures about variable interest entities with which it has involvement, if it is reasonably possible that it will consolidate or disclose information about the variable interest entity when FIN No. 46 becomes effective. The disclosure requirements are effective to all financial statements issued after January 31, 2003. We have no variable interest entities so no additional disclosures are needed.

Results of Operations

The following table sets forth, for the periods indicated, certain selected financial data expressed as a percentage of total revenues:

	Three Months Ended
	March 31, 2002		March 30, 2003
Service revenues	100.0	%	100.0	%
Cost of services rendered	74.5		76.1
Gross profit	25.5		23.9
Selling, general and administrative expenses	14.6		14.4
Corporate and administrative expenses	1.6		1.6
Depreciation and amortization expenses	0.8		1.1
Income from operations	8.5		6.8
Interest expense, net	3.9		0.8
Income before provision for income taxes	4.6		6.0
Provision for income taxes	1.9		2.4
Net income	2.7		3.6

Comparison of Three Months Ended March 30, 2003 to Three Months Ended March 31, 2002

Service Revenues. Our service revenues increased $41.2 million, or 39.9%, from $103.2 million for the three months ended March 31, 2002 to $144.4 million for the three months ended March 30, 2003. Our organic revenue growth was approximately 17% for the first three months of 2003 and was the result of increased volume and a favorable shift in the mix of services we rendered with the balance the result of acquisitions and increased pricing. In the first three months of 2003, price rates increased approximately 3% over the same period in 2002. The majority of the increase in revenues for the three months ended March 30, 2003 was attributable to a $23.6 million, or 29.8% increase in our per diem nurse staffing revenues from $79.1 million for the three months ended March 31, 2002 to $102.7 million for the three months ended March 30, 2003.

Of the increase of $23.6 million in per diem nurse staffing revenues, de novo branches opened in 2002 contributed $4.6 million, acquisitions completed in 2002 and 2003 contributed $11.3 million, and the balance of $7.7 million came from branches opened prior to 2002.

Service revenues from our staffing divisions other than the per diem nurse staffing division collectively increased $17.6 million, or 73.0%, from $24.1 million for the three months ended March 31, 2002 to $41.7 million for the three months ended March 30, 2003. The growth for the first three months of 2003 came from organic growth of $5.2 million and acquisitions completed in 2002 and 2003 of $12.4 million.

Cost of Services Rendered. Cost of services rendered increased $33.0 million, or 42.9%, from $76.9 million for the three months ended March 31, 2002 to $109.9 million for the three months ended March 30, 2003. The increase was attributable to the increase in service revenues and higher compensation, benefits and insurance costs associated with our healthcare professionals.

Gross Profit. Gross profit increased $8.2 million, or 31.1%, from $26.3 million for the three months ended March 31, 2002 to $34.5 million for the three months ended March 30, 2003, driven primarily by the growth in service revenues, partially offset by higher compensation for healthcare professionals and other direct costs. This resulted in a gross margin percentage of 23.9% for the first three months of 2003, as compared to 25.5% for the first three months of 2002.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $5.8 million, or 38.1%, from $15.0 million for the three months ended March 31, 2002 to $20.8 million for the three months ended March 30, 2003. As a percentage of revenue, selling, general and administrative expenses decreased from 14.6% for the first three months of 2002 to 14.4% for the first three months of 2003. The decrease is primarily attributable to the fewer de novo branches opened in the first three months of 2003 (four versus 11 for the comparable period in 2002) as well as the continued growth and maturation of de novo branches opened in the early part of 2002 and earlier.

Corporate and Administrative Expenses. Corporate and administrative expenses increased $0.6 million, or 38.0%, from $1.7 million for the three months ended March 31, 2002 to $2.3 million for the three months ended March 30, 2003. The increase was due to the expansion of the corporate infrastructure required to sustain our growth. As a percentage of revenue, corporate and administrative expenses were 1.6% for both the first three months of 2002 and 2003.

Depreciation and Amortization Expense. Depreciation and amortization expense increased $0.8 million, or 90.6%, from $0.8 million for the three months ended March 31, 2002 to $1.6 million for the three months ended March 30, 2003. The increase was attributable to an increase in depreciation expense of $0.7 million related to depreciation on prior year fixed asset additions and an increase in amortization expense of $0.1 million related to certain intangibles acquired in acquisitions.

Income from Operations. As a result of the above, income from operations increased $1.0 million, or 12.0%, from $8.8 million for the three months ended March 31, 2002 to $9.8 million for the three months ended March 30, 2003. As a percentage of revenue, income from operations decreased from 8.5% for the first three months of 2002 to 6.8% for the first three months of 2003.

Interest Expense, Net. Net interest expense decreased $2.9 million, or 71.3% from $4.1 million for the three months ended March 31, 2002 to $1.2 million for the three months ended March 30, 2003. The decrease was attributable to lower average debt levels for the first three months of 2003 as compared to the first three months of 2002. The average debt balance decreased as the proceeds from our initial public offering, which was completed on April 23, 2002, was used to pay down a portion of our outstanding debt.

Income Before Provision for Income Taxes. Income before income taxes increased $4.0 million, or 82.9%, from $4.7 million for the three months ended March 30, 2002 to $8.7 million for the three months ended March 31, 2003.

Provision for Income Taxes. Our provision for income taxes was $1.9 million for the three months ended March 31, 2002 and $3.5 million for the three months ended March 30, 2003 representing effective tax rates of 41.0% for the first three months of 2002 and 40.0% for the first three months of 2003.

Net Income. Net income increased $2.4 million from $2.8 million for the three months ended March 31, 2002 to $5.2 million for the three months ended March 30, 2003.

Seasonality

Due to the regional and seasonal fluctuations in the hospital patient census of our hospital and healthcare facility clients and due to the seasonal preferences for destinations by our temporary healthcare professionals, the number of healthcare professionals on assignment, revenue and earnings are subject to moderate seasonal fluctuations. Many of our hospital and healthcare facility clients are located in areas, particularly Florida, that experience seasonal fluctuations in population, during the winter and summer months. These facilities adjust their staffing levels to accommodate the change in this seasonal demand and many of these facilities utilize temporary healthcare professionals to satisfy these seasonal staffing needs.

Historically, the number of temporary healthcare professionals on assignment has increased from December through March followed by declines or minimal growth from April through November. As a result of all of these factors, results of any one quarter are not necessarily indicative of the results to be expected for any other quarter or for any year.

Liquidity and Capital Resources

Since our inception, we have funded our cash needs through various equity and debt issuances and through cash flow from operations. Currently, we have no commitments to make any material capital expenditures.

At March 30, 2003, we had cash totaling $4.0 million, working capital totaling $83.2 million and unused availability under our committed credit facility totaling $18.0 million, compared to cash totaling $4.6 million, working capital totaling $81.1 million and unused capacity under our committed credit facility totaling $2.0 million at December 29, 2002. Cash provided by operating activities was $3.6 million during the three months ended March 30, 2003 compared to cash used in operating activities of $2.9 million during the three months ended March 31, 2002.

Cash flows from operating activities was positively impacted during the three months ended March 30, 2003, as there were fewer de novo branches opened in the first three months of 2003 (four as compared to 11 in the comparable period of 2002). As such, less cash was required to fund our de novo branches. Increased earnings before non-cash expenses also had a positive impact on cash flow from operations. Because we rely on cash flow from operations as a source of liquidity, we are subject to the risk that a decrease in the demand for our staffing services could have an adverse impact on our liquidity. Decreased demand for our staffing services could result from an inability to attract qualified healthcare professionals, fluctuations in patient occupancy at our hospitals and healthcare facility clients and changes in state and federal regulations relating to our business.

We have a senior credit facility which consists of a term loan arrangement and a revolving line of credit. On July 3, 2002, we amended the terms of the senior credit facility and entered into a $25.0 million note. In accordance with the amendment, the remaining balance on the existing senior credit facility was paid off. On October 3, 2002, we amended the terms of the senior credit facility and entered into a $65.0 million note with terms and rights identical to the previous Term A notes and reduced the borrowing capacity of the revolving loan from $20.0 million to $15.0 million. On March 21, 2003, we amended the terms of our senior credit facility as follows: (i) Term A notes were increased to $77.0 million (Tranche A-1) with terms and rights identical to its previous Term A notes, (ii) Tranche A-2 term loans (Tranche A-2) provide for up to $13.0 million of borrowings prior to December 31, 2003, with a minimum initial borrowing of $5.0 million and in integral multiples of $1.0 million thereafter. Tranche A-2 loans cannot be reborrowed once repaid, are due in October 2006 and bear interest at a variable rate based on our leverage ratio with interest payable at least quarterly and principal payments payable quarterly commencing on March 31, 2004. The amendment did not affect the revolving loan’s $15.0 million borrowing capacity.

As of March 30, 2003, we had the full $13.0 million available for borrowing on Tranche A-2 and we had drawn $10.0 million and had $5.0 million available for borrowing on the revolving line of credit. As of March 30, 2003, the weighted average interest rate for the loans under our senior credit facility was 4.8%.

As the borrower under our senior credit facility, our subsidiary, Medical Staffing Network, Inc., may only pay dividends or make other distributions to us in the amount of $250,000 in any fiscal year to pay our operating expenses. This limitation on our subsidiary’s ability to distribute cash to us will limit our ability to obtain and service any additional debt at the holding company level. In addition, our subsidiary is subject to restrictions under the senior credit facility against incurring additional indebtedness.

We believe that our current cash balances, together with our existing credit lines and other available sources of liquidity and expected cash flows from our operating activities, will be sufficient for us to meet our current and future financial obligations, as well as to provide us with funds for working capital, anticipated capital expenditures and other needs for at least the next twelve months. No assurance can be given, however, that this will be the case. In the longer term, we may require additional equity and debt financing to meet our working capital needs, or to fund our acquisition activities, if any. There can be no assurance that additional financing will be available when required or, if available, will be available on satisfactory terms.

Critical Accounting Policies

In response to the Security and Exchange Commission Release Number 33-8040 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” and Release Number 33-8056, “Commission Statement about Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of consolidated financial statements. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on going basis, we will evaluate our estimates, including those related to asset impairment, accruals for self-insurance and compensation and related benefits, revenue recognition, allowance for doubtful accounts, and contingencies and litigation. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions. For a summary of all our significant accounting policies, including the critical accounting policies discussed below, see Note 1 to the consolidated financial statements included in the Form 10-K for the year ended December 29, 2002.

We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

• We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which results in a provision for bad debt expense. The adequacy of this allowance is determined by continually evaluating customer receivables, considering the customers’ financial condition, credit history and current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

• We have recorded goodwill and other intangibles resulting from our acquisitions through March 30, 2003. Through December 30, 2001, goodwill and other intangibles were amortized on a straight-line basis over their lives of 6 to 20 years. Pursuant to the provisions of SFAS No. 142, which we adopted in 2002, goodwill and intangible assets deemed to have an indefinite life are no longer amortized. We evaluate the recovery of the carrying amount of costs in excess of net tangible assets acquired by determining if an impairment has occurred. This evaluation is done annually or more frequently if indicators of an impairment arise. Indicators of an impairment include duplication of resources resulting from acquisitions, instances in which the estimated undiscounted cash flows of the entity are less than the remaining unamortized balance of the underlying intangible assets and other factors. At such time that impairment is determined, the intangible assets are written off during that period. If we are required to record an impairment charge in the future, it would have an adverse impact on our results of operations.

• We maintain an accrual for our health, workers compensation and professional liability that are either self-insured or partially self-insured and are classified in accounts payable. The adequacy of these accruals are determined by periodically evaluating our historical experience and trends related to health, workers compensation, and professional liability claims and payments, based on Company-specific actuarial computations and industry experience and trends. If such information indicates that the accruals are overstated or understated, we will adjust the assumptions utilized in its methodologies and reduce or provide for additional accruals as appropriate.

• We are subject to various claims and legal actions in the ordinary course of our business. Some of these matters include professional liability and employee-related matters. Hospital and healthcare facility clients may also become subject to claims, governmental inquiries and investigations and legal actions to which we may become a party relating to services provided by our professionals. From time to time, and depending upon the particular facts and circumstances, we may be subject to indemnification obligations under our contracts with hospital and healthcare facility clients relating to these matters. Although we are currently not aware of any such pending or threatened litigation that we believe is reasonably likely to have a material adverse effect on our financial condition or results of operations, if we become aware of such claims against us, we will evaluate the probability of an adverse outcome and provide accruals for such contingencies as necessary.

Caution Concerning Forward-Looking Statements

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment disclosures. This document contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues, and cash flow. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. These factors include the following:

• Our ability to attract and retain qualified nurses and other healthcare personnel;

• Our ability to enter into contracts with healthcare facility clients on terms attractive to us;

• The functioning of our information systems;

• The effect of existing or future government regulation and federal and state legislative and enforcement initiatives on our business;

• Our clients’ ability to pay for services;

• The effect of liabilities and other claims asserted against us;

• The effect of competition in the markets we serve; and

• Our ability to carry out our business strategy.

Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results. Given these uncertainties, the forward-looking statements discussed herein might not occur.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to interest rate risk arises principally from the variable rates associated with our senior credit facility. On March 30, 2003, we had borrowings of $87 million under our senior credit facility that were subject its variable rates, with a blended rate of 4.8%. As of March 30, 2003, an adverse change of 1.0% in the interest rate of all such borrowings outstanding would have caused us to incur an increase in interest expense of approximately $0.9 million on an annualized basis.

Foreign Currency Risk

We have no foreign currency risk as we have no revenue outside the United States and all of our revenues are in U.S. dollars.

Inflation

We do not believe that inflation has had a material effect on our results of operations in recent years and periods. There can be no assurance, however, that we will not be adversely effected by inflation in the future.

ITEM 4. CONTROLS AND PROCEDURES

Based on an evaluation of the disclosure controls and procedures conducted within 90 days of the date of filing this report on Form 10-Q, the Chief Executive Officer and President, Robert J. Adamson, and Chief Financial Officer, Kevin S. Little, have concluded that the disclosure controls and procedures are effective.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect those controls subsequent to the date of the our most recent evaluation thereof.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Fifth Amendment to Credit Agreement, dated as of March 21, 2003, among Medical Staffing Holdings LLC, the Subsidiaries of the Borrower identified as “Guarantors” on the signature pages thereto and Bank of America, N.A., as Administrative Agent.

99.1 Certification of Robert J. Adamson, Chief Executive Officer of Medical Staffing Network, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certification of Kevin S. Little, Chief Financial Officer of Medical Staffing Network, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

The following reports on Form 8-K were filed by Medical Staffing Network Holdings, Inc. during the quarter ended March 30, 2003:

Report on Form 8-K providing notice of the acquisition by Medical Staffing Network Holdings, Inc. of Travel Nurse International, under Item 2, filed on January 6, 2003.

Report on Form 8-K/A, amending the Form 8-K filed on November 22, 2002, providing financial statements of Health Search International, Inc. and subsidiary, and Clinical Resource Services, Inc., and pro forma financial information for Medical Staffing Network Holdings, Inc., under Item 7, filed on January 21, 2003.

Report on Form 8-K providing notice of the issuance by Medical Staffing Network Holdings, Inc. of a press release dated January 31, 2003, under Item 9, filed on January 31, 2003.

Report on Form 8-K providing notice of the issuance by Medical Staffing Network Holdings, Inc. of a press release dated February 18, 2003, under Item 9, filed on February 19, 2003.

Report on Form 8-K/A, amending the Form 8-K filed on December 20, 2002, providing financial statements of Travel Nurse International, and pro forma financial information for Medical Staffing Network Holdings, Inc., under Item 7, filed on March 7, 2003.

Report on Form 8-K providing notice of the issuance by Medical Staffing Network Holdings, Inc. of a press release dated April 23, 2003, under Item 9, filed on April 23, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MEDICAL STAFFING NETWORK HOLDINGS, INC.


Dated: May 14, 2003	By:	/s/ Robert J. Adamson
		Robert J. Adamson Chief Executive Officer and President


	By:	/s/ Kevin S. Little
		Kevin S. Little Chief Financial Officer

CERTIFICATIONS

I, Robert J. Adamson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Medical Staffing Network Holdings, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003


	/s/ Robert J. Adamson
	Robert J. Adamson
	Chief Executive Officer
	and President

I, Kevin S. Little, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Medical Staffing Network Holdings, Inc.;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: May 14, 2003


	/s/ Kevin S. Little
	Kevin S. Little
	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Description

10.1		Fifth Amendment to Credit Agreement, dated as of March 21, 2003, among Medical Staffing Holdings LLC, the Subsidiaries of the Borrower identified as “Guarantors” on the signature pages thereto and Bank of America, N.A., as Administrative Agent.

99.1		Certification of Robert J. Adamson, Chief Executive Officer of Medical Staffing Network, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification of Kevin S. Little, Chief Financial Officer of Medical Staffing Network, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1 3 j0867_ex10d1.htm EX-10.1

Ex. 10.1

FIFTH AMENDMENT

THIS FIFTH AMENDMENT (this “Amendment”) dated as of March 21, 2003 to the Credit Agreement referenced below is by and among Medical Staffing Network, Inc., a Delaware corporation (the “Borrower”), Medical Staffing Holdings, LLC, a Delaware limited liability company (the “Parent”), the Subsidiaries of the Borrower identified as “Guarantors” on the signature pages hereto (together with the Parent, the “Guarantors”), the Lenders identified on the signature pages hereto and Bank of America, N.A., as Administrative Agent.

W I T N E S S E T H

WHEREAS, a $120 million credit facility has been extended to the Borrower pursuant to the terms of that Credit Agreement (as amended, modified and supplemented from time to time, the “Credit Agreement”) dated as of October 26, 2001 among the Borrower, the Guarantors, the Lenders, LaSalle Bank, National Association, as syndication agent, and General Electric Capital Corporation, Barclays Bank, PLC, and Antares Capital Corporation, as co-documentation agents, and Bank of America, N.A., as Administrative Agent;

WHEREAS, the Borrower has requested certain modifications to the Credit Agreement;

WHEREAS, the requested modifications require the approval of the Required Lenders; and

WHEREAS, the Required Lenders have agreed to the requested modifications on the terms and conditions set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Capitalized Terms. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Credit Agreement.

2. Amendments.

(a) The following definitions in Section 1.1 of the Credit Agreement are amended to read as follows:

“Commitments” means the commitment of each Lender with respect to the Revolving Committed Amount and the Tranche A-1 Term Loan Committed Amount, the Tranche A-2 Term Loan Committed Amount and the commitment of the Swing Line Lender with respect to the Swing Line Committed Amount.

“Effective Date” means (a) solely for purposes of Section 2.4, the date specified in the applicable New Commitment Agreement(s) and (b) for all other purposes, July 5, 2002, the effective date of Amendment No. 2 to this Credit Agreement.

“Principal Amortization Payment” means (a) a principal payment on the Tranche A-1 Term Loans as set forth in Section 2.3(c) and (b) a principal payment on the Tranche A-2 Term Loans as set forth in Section 2.4(c).

“Tranche A Term Loan Commitment Percentage” means, for each Lender, the Tranche A-1 Term Loan Commitment Percentage and/or the Tranche A-2 Term Loan Commitment Percentage, as the context requires.

“Tranche A Term Loan Committed Amount” means the Tranche A-1 Term Loan Committed Amount and/or the Tranche A-2 Term Loan Committed Amount, as the context requires.

“Tranche A Term Loans” means the Tranche A-1 Term Loans and/or the Tranche A-2 Term Loans, as the context requires.

“Tranche A Term Note” or “Tranche A Term Notes” means the Tranche A-1 Term Note(s) and/or the Tranche A-2 Term Note(s), as the context requires.

(b) The following definitions are added to Section 1.1 of the Credit Agreement:

“New Commitment Agreement” means a New Commitment Agreement in the form of Exhibit 2.4(e) hereto.

“Tranche A-1 Term Loan Commitment Percentage” means, for each Lender, the percentage identified as its Tranche A-1 Term Loan Commitment Percentage on Schedule 1.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3.

“Tranche A-1 Term Loan Committed Amount” means SEVENTY-SEVEN MILLION DOLLARS ($77,000,000).

“Tranche A-1 Term Loans” means the Tranche A-1 Term Loans made to the Borrower pursuant to Section 2.3.

“Tranche A-1 Term Note” or “Tranche A-1 Term Notes” means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Tranche Tranche A-1 Term Loans provided pursuant to Section 2.3, individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time and as evidenced in the form of Exhibit 2.3(d).

“Tranche A-2 Term Loan Commitment Percentage” means as of any date of determination for each Lender the percentage obtained by dividing the Tranche A-2 Term Loan Commitment of such Lender by the Tranche A-2 Term Loan Committed Amount, as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3.

“Tranche A-2 Term Loan Commitment” means, with respect to each Lender, the commitment of such Lender to make Tranche A-2 Term Loans to the Borrower at the time and in the amount specified in its New Commitment Agreement.

“Tranche A-2 Term Loan Committed Amount” means the lesser of (a) the sum of the Tranche A-2 Term Loan Commitments of all the Lenders and (b) THIRTEEN MILLION DOLLARS ($13,000,000).

“Tranche A-2 Term Loans” means the Tranche A-2 Term Loans made to the Borrower pursuant to Section 2.4.

“Tranche A-2 Term Note” or “Tranche A-2 Term Notes” means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Tranche A-2 Term Loans provided pursuant to Section 2.4, individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time and as evidenced in the form of Exhibit 2.4(d).

(c) Schedule 1.1(a) to the Credit Agreement is amended in its entirety to read as set forth in Schedule 1.1(a) attached hereto.

(d) New Exhibits 2.4(d) and 2.4(e) are hereby added to the Credit Agreement to read as set forth in Exhibit 2.4(d) and Exhibit 2.4(e) attached hereto.

(e) All references in Exhibit 2.4(d), Exhibit 2.6 and Exhibit 11.3(b) to the Credit Agreement to “Tranche B Term Loan” and “Tranche B Term Loans” are hereby amended to read as “Tranche A-2 Term Loan” and “Tranche A-2 Term Loans”, respectively.

(f) All references in Section 2.3 of the Credit Agreement and in Exhibit 2.6 and Exhibit 11.3(b) to the Credit Agreement to “Tranche A Term Loan”, “Tranche A Term Loans”, “Tranche A Term Loan Commitment Percentage”, “Tranche A Term Loan Committed Amount”, “Tranche A Term Note” and “Tranche A Term Notes” are hereby amended to read as “Tranche A-1 Term Loan”, “Tranche A-1 Term Loans”, “Tranche A-1 Term Loan

Commitment Percentage”, “Tranche A-1 Term Loan Committed Amount”, “Tranche A-1 Term Note” and “Tranche A-1 Term Notes”, respectively.

(g) Section 2.3(c) of the Credit Agreement is amended to read as follows:

(c) Amortization. The principal amount of the Tranche A-1 Term Loans shall be repaid in quarterly installments in the amounts and on the dates set forth below:

Payment Date		Payment Amount

March 31, 2003		$2,598,750
June 30, 2003		$2,598,750
September 30, 2003		$2,598,750
December 31, 2003		$2,598,750
March 31, 2004		$5,486,250
June 30, 2004		$5,486,250
September 30, 2004		$5,486,250
December 31, 2004		$5,486,250
March 31, 2005		$7,170,625
June 30, 2005		$7,170,625
September 30, 2005		$7,170,625
December 31, 2005		$7,170,625
March 31, 2006		$3,994,375
June 30, 2006		$3,994,375
September 30, 2006		$3,994,375
October 26, 2006		Outstanding Principal Balance of the Tranche A-1 Term Loan

(h) A new Section 2.4 is added to the Credit Agreement to read as follows:

2.4 Tranche A-2 Term Loans.

(a) Tranche A-2 Term Loan. Subject to the terms and conditions set forth herein (including Section 2.4(e) below), each Lender severally agrees to make available to the Borrower from time to time prior to December 31, 2003 on the applicable Effective Date a term loan (collectively, the “Tranche A-2 Term Loans”) to the Borrower, in Dollars, in an amount equal to such Lender’s Tranche A-2 Term Loan Commitment; provided that the aggregate amount of all such Tranche A-2 Term Loans made shall not exceed the Tranche A-2 Term Loan Committed Amount. Once repaid, Tranche A-2 Term Loans cannot be reborrowed.

(b) Funding of Tranche A-2 Term Loans. On the applicable Effective Date, each applicable Lender will make its applicable Tranche A-2 Term Loan Commitment available to the Administrative Agent by deposit, in Dollars and in immediately available funds, at the offices of the Administrative Agent at its principal office in Charlotte, North Carolina or at such other address as the Administrative Agent may designate in writing. The amount of such Tranche A-2 Term Loans will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office of the Administrative Agent, to the extent the amount of such Tranche A-2 Term Loans are made available to the Administrative Agent. Tranche A-2 Term Loans may be made as Eurodollar Loans or Base Rate Loans.

No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make a Tranche A-2 Term Loan hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. If the Administrative Agent shall have received an executed New Commitment Agreement (whether an original or via telecopy) from a Lender, the Administrative Agent may assume that such Lender has or will make the amount of its Tranche A-2 Term Loans available to the Administrative Agent on the applicable Effective Date, and the Administrative Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do so) make available

to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for such Tranche A-2 Term Loan and (ii) from a Lender at the Federal Funds Rate if paid within two Business Days of the date of drawing and thereafter at a rate equal to the Base Rate.

(c) Amortization. The principal amount of the Tranche A-2 Term Loans shall be repaid in quarterly payments on the dates set forth below:

Principal Amortization Payment Dates	Tranche A-2 Term Loan Principal Amortization Payment Amount (expressed as a percentage of outstanding Tranche A-2 Term Loans outstanding on December 31, 2003)

March 31, 2004	7.5	%
June 30, 2004	7.5	%
September 30, 2004	7.5	%
December 31, 2004	7.5	%
March 31, 2005	7.5	%
June 30, 2005	7.5	%
September 30, 2005	7.5	%
December 31, 2005	7.5	%
March 31, 2006	10	%
June 30, 2006	10	%
September 30, 2006	10	%
October 26, 2006	Outstanding Principal Balance of the Tranche A-2 Term Loan

(d) Tranche A-2 Term Notes. The portion of the Tranche A-2 Term Loan made by each Lender shall be evidenced by a duly executed promissory note of the Borrower to such Lender in an original principal amount equal to such Lender’s Tranche A-2 Term Loan Commitment and substantially in the form of Exhibit 2.4(d).

(e) Additional Procedures for Requesting Tranche A-2 Term Loans. The Borrower may at any time and from time to time prior to December 31, 2003, upon prior written notice by the Borrower to the Administrative Agent, request borrowings of Tranche A-2 Term Loans in an aggregate amount not to exceed the Tranche A-2 Term Loan Committed Amount from any existing Lender or from any other Person reasonably acceptable to the Administrative Agent; provided that:

(i) any such borrowing shall be in a minimum principal amount of $5 million and in integral multiples of $1 million in excess thereof;

(ii) no Default or Event of Default shall be continuing at the time of any such borrowing;

(iii) prior to any such borrowing the Borrower shall have delivered to the Administrative Agent a certificate of its chief financial officer demonstrating that the ratio of (A) Funded Indebtedness of the Credit Parties and their Subsidiaries on a consolidated basis on the date of such borrowing (including, for purposes hereof, the amount of such borrowing) to (B)

EBITDA for the period of the four fiscal quarters most recently ended for which the Borrower has delivered financial statements pursuant to Section 7.1(a) or (b), is less than 2.0 to 1.0;

(iv) no existing Lender shall be under any obligation to issue a Tranche A-2 Term Loan Commitment and any such decision whether to issue a Tranche A Term Loan Commitment shall be in such Lender’s sole and absolute discretion; and

(v) the Borrower and such lender shall have executed and delivered to the Administrative Agent a New Commitment Agreement.

(i) Voluntary Prepayments. The phrase “any prepayment of the Tranche A Term Loan shall be applied ratably to the remaining Principal Amortization Payments thereof” in Section 3.3(a) of the Credit Agreement is hereby amended to read as “any prepayment of the Tranche A-1 Term Loan or the Tranche A-2 Term Loan shall be applied ratably to the Tranche A-1 Term Loan and the Tranche A-2 Term Loan (in each case ratably to the remaining Principal Amortization Payments thereof)”.

(j) Mandatory Prepayments. The phrases “to the Tranche A Term Loans (to the remaining Principal Amortization Payments in inverse order of maturities thereof)” and “and Tranche A Term Loans (to the remaining Principal Amortization Payments in inverse order of maturities thereof)” in Section 3.3(c) of the Credit Agreement are hereby amended to read as “ratably to the Tranche A-1 Term Loans (to the remaining Principal Amortization Payments in inverse order of maturities thereof) and the Tranche A-2 Term Loans (to the remaining Principal Amortization Payments in inverse order of maturities thereof)” and “, Tranche A-1 Term Loans (to the remaining Principal Amortization Payments in inverse order of maturities thereof) and the Tranche A-2 Term Loans (to the remaining Principal Amortization Payments in inverse order of maturities thereof)”, respectively.

(k) Section 7.11(c) of the Credit Agreement is amended to read as follows:

(c) EBITDA. EBITDA, as of the end of each fiscal quarter of the Borrower, for each period set forth below shall not be less than (i) $40,000,000 for the twelve month period ending March 31, 2003, (ii) $40,000,000 for the twelve month ending June 30, 2003, (iii) $40,000,000 for the twelve month period ending September 30, 2003, (iv) $40,000,000 for the twelve month period ending December 31, 2003 and (v) $50,000,000 for each twelve month period thereafter.

3. Covenants. The Credit Parties covenant and agree to furnish to the Administrative Agent (a) by no later than April 26, 2003 an opinion of counsel to the Credit Parties with respect to this Amendment in form and substance reasonably satisfactory to the Administrative Agent and (b) by no later than March 25, 2003 original counterparts to this Amendment duly executed by the Credit Parties. The failure to comply with the covenant in this Section 3 shall constitute an immediate Event of Default.

4. Conditions Precedent. This Amendment shall become effective immediately upon receipt by the Administrative Agent of each of the following, in form and substance satisfactory to the Administrative Agent:

(a) counterparts of this Amendment duly executed by the Credit Parties;

(b) counterparts of this Amendment duly executed by the requisite Lenders;

(d) certified copies of resolutions of the board of directors of each of the Credit Parties approving this Amendment and authorizing the execution and delivery hereof; and

(e) payment by the Borrower of all fees and expenses owing to the Administrative Agent and the Lenders in connection with this Amendment.

5. Reaffirmation of Representations and Warranties. The Borrower affirms that the representations and warranties set forth in the Credit Agreement and the other Credit Documents (as hereby amended) are true and correct as of the date hereof (except those that expressly relate to an earlier period).

6. Reaffirmation of Guaranty. Each Guarantor (i) acknowledges and consents to all of the terms and conditions of this Amendment, (ii) affirms all of its obligations under the Credit Documents and (iii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge such Guarantor’s obligations under the Credit Agreement or the other Credit Documents.

7. Reaffirmation of Security Interests. The Borrower and each Guarantor (i) affirms that each of the Liens granted in or pursuant to the Credit Documents are valid and subsisting and (ii) agrees that this Amendment shall in no manner impair or otherwise adversely effect any of the Liens granted in or pursuant to the Credit Documents.

8. No Other Changes. Except as modified hereby, all of the terms and provisions of the Credit Agreement and the other Credit Documents (including schedules and exhibits thereto) shall remain in full force and effect.

9. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. Delivery of an executed counterpart of this Amendment by telecopy by any party hereto shall be effective as such party’s original executed counterpart and shall constitute a representation that such party’s original executed counterpart will be delivered.

10. No Novation. The execution and delivery of this Amendment shall not constitute a novation of any indebtedness or other obligations owing to the Lenders under the Credit Agreement based on any facts or events occurring or existing prior to the execution and delivery of this Amendment. On the date hereof, the credit facilities described in the Credit Agreement shall be amended and supplemented as described in this Amendment, and all loans and other obligations of the Borrower and Guarantors outstanding as of the date hereof under the Credit Agreement shall be deemed to be loans and obligations outstanding under the Credit Agreement as amended, without further action by any Person.

11. Governing Law. This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with, the laws of the State of New York.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.

BORROWER:	MEDICAL STAFFING NETWORK, INC.,
	a Delaware corporation

	By:	/s/ Jeff Jacobsen
	Name:	Jeff Jacobsen
	Title:	Executive Vice President

GUARANTORS:	MEDICAL STAFFING HOLDINGS, LLC,
	a Delaware limited liability company

	By:	Medical Staffing Network Holdings, Inc.
		(formerly known as MSN Holdings, Inc.),
		a Delaware corporation, its sole member

		By:	/s/ Kevin Little
		Name:	Kevin Little
		Title:	CFO

[Signature Pages Continue]

AGENT:	BANK OF AMERICA, N.A., in its capacity as Administrative Agent

	By:	/s/ Suzeanna Wan
	Name:		Suzeanna Wan
	Title:		AVP

LENDERS:	BANK OF AMERICA, N.A., in its capacity as a Lender

	By:	/s/ Larry J. Gordon
	Name:		Larry J. Gordon
	Title:		Principal

	LASALLE BANK, NATIONAL ASSOCIATION

	By:	/s/ Jody Staszesky
	Name:		Jody Staszesky
	Title:		Senior Vice President

	GENERAL ELECTRIC CAPITAL CORPORATION

	By:	/s/ Jay Sepanski
	Name:		Jay Sepanski
	Title:		Duly Authorized Signatory

	ANTARES CAPITAL CORPORATION

	By:
	Name:
	Title:

	JP MORGAN CHASE BANK, as trustee of the
	ANTARES FUNDING TRUST created under
	the Trust Agreement dated as of November 30, 1999

	By:	/s/ Jim Ely
	Name:
	Title:

	JPMORGAN CHASE BANK

	By:	/s/ Jim Ely
	Name:
	Title:

[Signature Pages Continue]

VAN KAMPEN PRIME RATE INCOME TRUST

By:	Van Kampen Investment Advisory Corp.

	By:	/s/ Brad Langs
	Name:		Brad Langs
	Title:		Executive Director

VAN KAMPEN SENIOR INCOME TRUST

By:	Van Kampen Investment Advisory Corp.

	By:	/s/ Brad Langs
	Name:		Brad Langs
	Title:		Executive Director

VAN KAMPEN SENIOR FLOATING RATE FUND

By:	Van Kampen Investment Advisory Corp.

	By:	/s/ Brad Langs
	Name:		Brad Langs
	Title:		Executive Director

MARINER CDO 2002, LTD.

By:
Name:
Title:

Schedule 1.1(a)

COMMITMENT PERCENTAGES

Notice Address	Revolving Commitment		Revolving Loan Commitment Percentage		Tranche A-1 Term Loan Commitment		Tranche A-1 Term Loan Commitment Percentage

Bank of America, N.A.	$	3,500,000	23.333333333	%	$	0	0	%

Operations Contact
Bank of America, N.A.
101 N. Tryon Street, 15th Floor NC1-001-15-04
Charlotte, NC 28255
Attn: Lynne Cole, Agency Services
Telephone: 704-386-9068
Facsimile: 704-409-0003

Credit Contact
Bank of America, N.A.
100 North Tryon Street, 13th Floor
Mail Code: NC1-007-13-06
Charlotte, NC 28255-0001
Attn: Larry Gordon
Telephone: 704-388-1115
Facsimile: 704-409-0563

With a copy to:

Bank of America, N.A.
100 North Tryon Street, 13th Floor
Mail Code: NC1-007-13-06
Charlotte, NC 28255-0001
Attn: Molly Schugel
Telephone: 704-386-7745
Facsimile: 704-409-0176

Notice Address	Revolving Commitment		Revolving Loan Commitment Percentage		Tranche A-1 Term Loan Commitment		Tranche A-1 Term Loan Commitment Percentage

General Electric Capital Corporation	$	4,000,000	26.666666667	%	$	19,750,000	25.649350649	%

Operations Contact:
General Electric Capital Corporation
500 West Monroe Street
Chicago, IL 60611
Attn: Todd Linehan
Telephone: 312-441-6767
Facsimile: 312-441-7367

Credit Contact
General Electric Capital Corporation
500 West Monroe Street, 29^th Floor
Chicago, IL 60611
Attn: Sophia Taylor
Telephone: 312-441-7196
Facsimile: 312-441-7598

LaSalle Bank National Association	$	2,500,000	16.666666667	%	$	17,750,000	23.051948052	%

Operations Contact
LaSalle Bank National Association
135 South LaSalle Street, Suite 1425
Chicago, IL 60603
Attn: Margaret Henderson
Telephone: 312-904-1254
Facsimile: 312-904-6373

Credit Contact
LaSalle Bank National Association
135 South LaSalle Street, Suite 826
Chicago, IL 60603
Attn: Dana Friedman
Telephone: 312-904-6583
Facsimile: 312-904-6457

Notice Address	Revolving Commitment		Revolving Loan Commitment Percentage		Tranche A-1 Term Loan Commitment		Tranche A-1 Term Loan Commitment Percentage

Antares Capital Corporation	$	2,500,000	16.666666667	%	$	6,750,000	8.766233766	%

Operations Contact
Antares Capital Corporation
311 S. Wacker Drive, Suite 6400
Chicago, IL 60606
Attn: Joyce King
Telephone: 312-697-3919
Facsimile: 312-697-3980

Credit Contact
Antares Capital Corporation
311 S. Wacker Drive, Suite 6400
Chicago, IL 60606
Aatn: Kristin Piper
Telephone: 312-697-3922
Facsimile: 312-697-3998

Antares Funding Trust	—		—		$	3,000,000	3.896103896	%

Operations Contact
Antares Funding Trust
Chase Manhattan Bank
600 Travis, 48^th Floor
Houston, TX 77002
Attn: Leslie Hundley
Telephone: 713-216-0540
Facsimile: 713-216-3572

Credit Contact
Antares Funding Trust
311 South Wacker Drive, Suite 6400
Chicago, IL 60606
Attn: Kristin Clark
Telephone: 312-697-3922
Facsimile: 312-697-3998

Notice Address	Revolving Commitment		Revolving Loan Commitment Percentage		Tranche A-1 Term Loan Commitment		Tranche A-1 Term Loan Commitment Percentage

JP Morgan Chase Bank	$	2,500,000	16.666666666	%	$	9,000,000	11.688311688	%

Operations Contact
JP Morgan Chase Bank
One Chase Manhattan Plaza, 8^th Floor
New York, NY 10081
Attn: Christopher Gomes
Telephone: 212-552-7326
Facsimile: 212-552-7500

Credit Contact
JP Morgan Chase Bank
270 Park Avenue, 48^th Floor
New York, NY 10017
Attn: Jim Ely
Telephone: 212-270-6278
Facsimile: 212-270-3279

Van Kampen Prime Rate Income Trust	—		—		$	6,187,500	8.035714286	%

Operations Contact:
Van Kampen
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Brian Buscher/Brad Lang
Telephone: 630-684-6283/6923
Facsimile: 630-684-6023

Credit Contact:
State Street Bank & Trust Corporate Trust Department
P.O. Box 778 Boston, MA 02102
Attn: Kevin Cedorchuck
Telephone: 617-662-1229
Facsimile: 617-988-9670

Notice Address	Revolving Commitment	Revolving Loan Commitment Percentage	Tranche A-1 Term Loan Commitment		Tranche A-1 Term Loan Commitment Percentage

Van Kampen Senior Income Trust			$	9,687,500	12.581168831	%

Operations Contact:
Van Kampen
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Brian Buscher/Brad Lang
Telephone: 630-684-6283/6923
Facsimile: 630-684-6023

Credit Contact:
State Street Bank & Trust
Corporate Trust Department
P.O. Box 778
Boston, MA 02102
Attn: Kevin Cedorchuck
Telephone: 617-662-1229
Facsimile: 617-988-9670

Van Kampen Senior Floating Rate Fund			$	1,875,000	2.435064935	%

Operations Contact:
Van Kampen
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Brian Buscher/Brad Lang
Telephone: 630-684-6283/6923
Facsimile: 630-684-6023

Credit Contact:
State Street Bank & Trust
Corporate Trust Department
P.O. Box 778
Boston, MA 02102
Attn: Kevin Cedorchuck
Telephone: 617-662-1229
Facsimile: 617-988-9670

Notice Address	Revolving Commitment		Revolving Loan Commitment Percentage		Tranche A-1 Term Loan Commitment		Tranche A-1 Term Loan Commitment Percentage

Mariner CDO 2002, Ltd.					$	3,000,000	3.896103896	%

Operations Contact:
Mariner CDO 2002, Ltd.
c/o LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, IL 60603
Attn: CDO Trust Services — Mariner 2002-1
Attn: Heather McNally
Telephone: 312-904-6812
Facsimile: 312-904-1086

Credit Contact:
Mariner CDO 2002, Ltd.
c/o Antares Capital Corporation
311 South Wacker Drive, Suite 6400
Chicago, Illinois 60606
Attn: David Mahon
Telephone: 312-697-3959
Facsimile: 312-697-3998

TOTAL	$	15,000,000	100.000000000	%	$	77,000,000	100.000000000	%

Exhibit 2.4(d)

FORM OF TRANCHE A-2 TERM NOTE

Lender:							, 200
Principal Sum: $

FOR VALUE RECEIVED, Medical Staffing Network, Inc., a Delaware corporation (the “Borrower”), hereby promises to pay to the order of the Lender set forth above (the “Lender”) and its registered assigns, at the office of Bank of America, N.A. (the “Administrative Agent”) as set forth in that certain Credit Agreement dated as of October 26, 2001 among the Borrower, Medical Staffing Holdings, LLC, the Domestic Subsidiaries of the Borrower, the Lenders named therein (including the Lender) and Bank of America, N.A., as Administrative Agent (as modified and supplemented and in effect from time to time, the “Credit Agreement”), the Principal Sum set forth above (or such lesser amount as shall equal the aggregate unpaid principal amount of the Tranche A-2 Term Loan made by the Lender to the Borrower under the Credit Agreement), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of such Tranche A-2 Term Loan, at such office, in like money and funds, for the period commencing on the date of such Tranche A-2 Term Loan until such Tranche A-2 Term Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.

This Note is one of the Tranche A-2 Term Notes referred to in the Credit Agreement and evidences the Tranche A-2 Term Loan made by the Lender thereunder. Capitalized terms used in this Tranche A-2 Term Note and not otherwise defined shall have the respective meanings assigned to them in the Credit Agreement and the terms and conditions of the Credit Agreement are expressly incorporated herein and made a part hereof.

The Credit Agreement provides for the acceleration of the maturity of the Tranche A-2 Term Loan evidenced by this Tranche A-2 Term Note upon the occurrence of certain events (and for payment of collection costs in connection therewith) and for prepayments of such Tranche A-2 Term Loan upon the terms and conditions specified therein. In the event this Tranche A-2 Term Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorney fees.

The date, amount, type, interest rate and duration of Interest Period (if applicable) of the Tranche A-2 Term Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing hereunder or under this Tranche A-2 Term Note in respect of the Tranche A-2 Term Loan to be evidenced by this Tranche A-2 Term Note, and each such recordation or endorsement shall be prima facie evidence of such information.

This Note and the Tranche A-2 Term Loan evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained for such purpose by or on behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement.

THIS TERM LOAN NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Borrower has caused this Tranche A-2 Term Note to be executed as of the date first above written.

						MEDICAL STAFFING NETWORK, INC.

						By:
						Title:

Exhibit 2.4(e)

FORM OF NEW COMMITMENT AGREEMENT

Reference is made to the Credit Agreement dated as of October 26, 2001 among Medical Staffing Network, Inc., a Delaware corporation (the “Borrower”), Medical Staffing Holdings, LLC, a Delaware limited liability company (the “Parent”), the Subsidiaries of the Borrower identified as “Guarantors” on the signature pages hereto (together with the Parent, the “Guarantors”), the Lenders identified therein and Bank of America, N.A., as Administrative Agent (as the same may be amended, modified, extended or restated from time to time, the “Credit Agreement”). All of the defined terms in the Credit Agreement are incorporated herein by reference.

1. Effective as of the Effective Date set forth below, the undersigned Lender hereby confirms its Tranche A-2 Term Loan Commitment, in an aggregate principal amount of up to the amount specified below to make Tranche A-2 Term Loans in accordance with the provisions of Section 2.4. If the undersigned Lender is already a Lender under the Credit Agreement, such Lender acknowledges and agrees that such Tranche A-2 Term Loan Commitment is in addition to any existing Commitment of such Lender under the Credit Agreement. If the undersigned Lender is not already a Lender under the Credit Agreement, such Lender hereby (a) represents and warrants that it has full power and authority, and has taken all action necessary, to execute and deliver this New Commitment Agreement and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (b) acknowledges, agrees and confirms that, by its execution of this New Commitment Agreement, such Lender will, as of the Effective Date, be a party to the Credit Agreement and be bound by the provisions of the Credit Agreement and, to the extent of its Commitment, have the rights and obligations of a Lender thereunder and (c) attaches all documentation required to be delivered pursuant to Section 3.13(b) of the Credit Agreement.

2. This New Commitment Agreement shall be governed by and construed in accordance with the laws of the State of New York.

Amount of new Tranche A-2 Term Loan Commitment		$

Effective Date of new Tranche A-2 Term Loan Commitment		, 20

The terms set forth above
are hereby agreed to:

[LENDER]		Address for Notices:

By:
Title:
		Ph:
		Fx:

CONSENTED TO:

BANK OF AMERICA, N.A.,
as Administrative Agent	MEDICAL STAFFING NETWORK, INC.

By:	By:
Title:	Title:

EX-99.1 4 j0867_ex99d1.htm EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medical Staffing Network Holdings, Inc. (the “Company”) on Form 10-Q for the period ending March 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Adamson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert J. Adamson
Robert J. Adamson
Chief Executive Officer and President
May 14, 2003

EX-99.2 5 j0867_ex99d2.htm EX-99.2

Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medical Staffing Network Holdings, Inc. (the “Company”) on Form 10-Q for the period ending March 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin S. Little, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin S. Little
Kevin S. Little
Chief Financial Officer
May 14, 2003